Morgan Stanley reported more good news regarding the credit quality in CMBS last week, noting that over the past month, the three major ratings agencies upgraded a total of 59 CMBS classes and had no downgrades. They further noted that upgrades to downgrades now exceed 12:1 for the year.

Why is the commercial real estate sector doing better than corporates? Morgan Stanley suggests one reason is that the current downturn has been relatively mild in terms of delinquencies and losses. Another reason, they say, is supplied by a Fitch study that will be released shortly which shows that many delinquent commercial mortgages in CMBS have become current or paid off in full. Furthermore, for those loans going through foreclosure and liquidation, the average loss was only about 20% of the remaining balance.

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